The only reason that find a market bottom could take years is with shenanigans like this! The longer they try to reinflate the bubble and prop up prices the longer it will take to come down.

If the government just stayed out of this we’d have already taken the pain (and it would be PAINFUL) but at least we’d be starting a true recovery! Not some phoney, bs, CNBC recovery.

Credit to all the people above who can see this program for what it truly is: a way to delay the pain. Fannie Mae doesn’t care about helping people. They just don’t want to have to write down the losses today because they know how bad that will look. They are already hemorrhaging money at a massive rate ($18.9 billion for the third quarter alone!) and it’s only getting worse.

The other option would be to have immediate auctions with a requirement that the buyer or investor must immediately get the house occupied, or they forfeit the purchase.

While the US plays games with all these existing problem loans and new problem ones (ie. the upcoming commercial, FHA, and prime loan mini-bubbles) at some point in the near future we will incur either 1) foreigners requiring higher yields to purchase our debt or 2) inflation resulting in higher interest rates set by the Fed.

Both #1 and #2 scenario would put a downward pressure on home prices. Then again there’s always option #3 of the US just defaulting on its debt and starting over. Scary thought.

Does this just allow them to replace a present write-down with a small cashflow and a deferred loss/writedown?

It seems that if the market goes up and the rental costs (evictions, maintainence)outweigh the losses caused by the glut of foreclosed homes on the market, this could be a sound decision.

A reason why the banks wouldn’t have done this before is that they don’t own the homes. The investment banks do.

I don’t have enough information to know if it is a reasonable temporary solution. The alternative is that Fannie Mae loses a ton of money today… They may end up losing even more mismanaging the rentals but at least there is a hope they will do better in the future. Sadly, either way the taxpayers will ultimately have to cover the losses.

-Rick Francis

a) auction off the house
b) keep the house, and rent it out

I don’t like seeing the government involved in any of this, but if Fannie owns the houses, then they should rent them out if they can get a better return doing that than selling them at firesale auction prices.

The homeowners are not getting “bailed out”, since they no longer own the home.

But, again, I don’t think the government should be involved in any of this for two reasons: Big Government, and Unintended Consequences.